US STOCKS-Wall Street drops before Fed; tech sector weighs

NEW YORK, Sept 10 (Reuters) - Wall Street stocks fell onM onday as investors locked in gains on a recent rally ahead ofpossible policy action from the Federal Reserve later this week,while weakness in Intel shares weighed on the Nasdaq.

The benchmark S&P 500 index closed at highs last week notseen in nearly five years, motivating some investors to pullback from those gains Monday ahead of the Federal Reserve'sdecision on Thursday.

"The markets are up a lot, so the short-term risks are onthe downside," said Jim Awad, managing director at ZephyrManagement in New York.

Shares of Intel Corp lost nearly 4 percent afterseveral brokerages cut price targets on the chipmaker. Shares ofApple Inc, the world's largest publicly traded companyby market value, dropped more than 2 percent as the market'sweakness was felt most in tech shares.

Investors are on guard against the unknown outcomes ofseveral events this week, including a ruling by Germany'sconstitutional court on Wednesday on the legality of the eurozone's permanent financial rescue fund and the Fed decision onThursday.

Expectations for more stimulus from central banks in theUnited States and Europe have underpinned markets in recentweeks.

The Fed looks set to launch a third round of bond purchasesthis week and economists said Friday's weak report on jobsgrowth for August was likely to convince the U.S. central bank alooser monetary policy was needed.

Analysts said the uptrend for markets remains intact, andtraders were eyeing the 1,440 level on the S&P as the nextbarrier to further gains.

"When you have the central banks... practicing loosemonetary conditions, you basically have a put on the market. Andeven any weakness that does develop should be somewhatcontained," said Michael Gibbs, co-head of equity advisory groupat Raymond James in Memphis, Tennessee.

Investors sold some big-cap tech names that have done wellall year. Worse-than-expected data on imports from China addedto selling in the sector.

Chinese import data showed a fall of 2.6 percent on the yearin August, short of expectations for a 3.5 percent rise. Exportsgrew 2.7 percent, below forecasts for a 3 percent rise in aReuters poll.

American International Group Inc shed 2 percent to$33.30 after the U.S. Treasury Department said it will sell mostof its stake in the insurer, making the government a minorityinvestor for the first time since it rescued the company in thedepths of the financial crisis four years ago.

Plains Exploration & Production Co said it will buyBP Plc's stake in some deepwater Gulf of Mexicowells for $5.55 billion to boost its oil production. U.S.-listedshares of BP edged up 0.26 percent to $42.04 and PlainsExploration slumped 10.5 percent to $36.09.

Titan Machinery Inc shares dropped 23 percent to$19.41 after the farm equipment retailer cut its full-yearprofit forecast after it reported a lower-than-expectedquarterly profit as the worst drought in 56 years in the U.S.Midwest hit prices of tractors and combines.

On both the New York Stock Exchange and Nasdaq, three stocksfell for every two that rose.

Volume was light, with about 5.56 billion shares traded onthe New York Stock Exchange, the American Stock Exchange andNasdaq, below last year's daily average of 7.84 billion.